Accounting information system an overview 9e bodnar and hopwood 2015 chapter 15

The Human Resources
Management and Payroll Cycle
Chapter 15

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Learning Objectives
• Describe the major business activities and related
information processing operations performed in the
human resources management (HRM)/payroll cycle.
• Discuss the key decisions to be made in the
HRM/payroll cycle and identify the information
needed to make those decisions.
• Identify the major threats in the HRM/payroll cycle
and evaluate the adequacy of various internal control
procedures for dealing with them.
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Human Resource Management Process
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Recruit and hire new employees
Training
Job assignment
Compensation (payroll)
Performance evaluation
Discharge of employees (voluntary or
involuntary)

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Payroll Cycle Activities
• Update payroll master data
• Validate time and attendance data
▫ Source document: time sheets

• Prepare payroll
▫ Payroll register and deduction register

• Disburse payroll
• Disburse taxes and miscellaneous deductions

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1. Update Master Payroll Data
2. Validate Time and Attendance Data
3. Prepare Payroll
Threats

Unauthorized changes to
payroll master data
2. Inaccurate updating of
master data
3. Inaccurate time and
attendance data
4. Errors in processing payroll

Controls

1.

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1 a. Access controls and
segregation of duties
2 a. Data processing integrity
controls
3 a. Supervisory review
b. Source data automation for
data capture
4 a. Data processing integrity
controls
b. Supervisory review

4. Disburse Payroll
5. Disburse Payroll Taxes
Threats

1.

Theft or fraudulent
distribution of paychecks
2. Failure to make required
payments
3. Untimely payments
4. Inaccurate payments

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Controls

1 a. Restrict access to blank
payroll checks and check
signing machine
b. Use separate account
(imprest fund)
2 a. Configure system to make
automatic payments on time
3 a. Configure system to make
automatic payments on time
4 a. Process integrity controls
b. Supervisory review

Reasons to Outsource Payroll
• Reduce costs
▫ Cost of processing and minimize errors

• Broader range of benefits
▫ Administration of benefits

• Free up computer resources

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Key Terms
• Human resource management
(HRM)/payroll cycle
• Knowledge management
systems
• Time card
• Time sheet
• Payroll register

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Deduction register
Earnings statement
Payroll clearing account
Flexible benefits plan
Payroll service bureau
Professional employer
organization (PEO)